Hi Everyone. My husband and I have really good credit and we have qualified to purchase a bigger home in a better area, which is what we always wanted. We have waited five years for this opportunity and is afraid the housing market and interest will go up. The problem is we already have a house under my husband name only. Our new home will be in both of our names. We are hoping to rent out our current home but will have to pay an extra $700 out of pocket each month just to pay the mortgage for the rental. We also have our new mortgage to pay. We can afford to do so but won't be able to save. I'm anxious and not sure we are making a wise decision because we are afraid we might not be able to rent the house right away, therefore we will have to pay both mortgages each month. We would love to sell it but is upside down right now. We don't want to foreclose it but is considering the worst case scenario. After we get into our new house, and have to foreclose, I was wondering if my husband will be liable for that house (besides paying taxes on it) or if they can come after our new house or even garnish our wages. Any advice is appreciated. Thank you.
Thank you everyone for your advice/information. I am speaking to a real estate attorney and my CPA and will proceed accordingly. I live in an area that is not so safe for me or my child. I only let my son play outside in my back yard and not in the front yard. All except one house on my street are renters because the owners all moved out. And they don't care about the people they rent to as long as they get their rent. The house across the street has all kinds of activity going on because they sell marijuana and who knows what else. I'm really over the police helicopter flying over my house looking for a suspect or what ever else. Today as I backed my car out a kid throws a rock at my car for no reason at all. I'm so over this. My husband and I works very enough to qualify for a loan and finally get out of this area and give my son a better education and safer place to live. I bought my first house at 24 years old and was able to pay and keep it for four years because I was young and didn't know any better so I got an ARM. Well my mortgage went from 1300/mo to 2600 and continued to increased. Because I was trying to do the right thing, I worked my behind off and spent most of my days off doing OT to try to save my house. Did the bank care about helping me? No! I begged and did the loan re-modification for them to tell me they lost my paperwork for the 3rd time because they are trying to stall. Bottom line is after trying to save my house for a year from being foreclosed I lost my first house, my American dream. I know we all got stories out there and I'm not justifying my actions (not sure what's it's gonna be yet) but I just want to give you all a little background about myself. I am 33 years old now and my son is my priority. Providing the best life for him and keeping him safe is what I'll do. Thanks again for your advice and thanks for listening to me.
No, sorry I would not do this. If you cannot afford to pay both mortgages, then I think it is way too risky. What happens if you cannot find a renter or the renter you have doesn't pay? If you cannot sell because you are upside down, then it seems like a lose-lose to me.
Dave Ramsay's rules of thumb:
•Mortgage payment not to exceed 25% of take home pay.
•NEVER try to "do a rental" unless you OWN it free & clear, or can buy it in full with cash. No mortgages on rental properties!
Well, do you NEED a bigger house? Or is it only an option because you qualify? Just because you can have the bigger house, doesn't make it a necessity. It sounds like you'd be stretched financially if you bought the bigger house.
I guess I'm old-fashioned, and I am going to sound harsh.
Since when did it become okay to buy a new house with the consideration of letting your old house go into foreclosure? The ripple effects of foreclosure hurt a lot of people, and look what has happened to the U.S. and the world's economy, because of people investing in things they couldn't really afford using borrowed money.
I just shake my head.
Tiffany, if I were you, I would not buy a house in your circumstance. It will be a good while before interest rates rise and home values rise. You should not rent out your house for less than your total payment - mortgage, taxes and insurance. You should talk to your tax advisor about how rental income will affect your taxes - you can depreciate your house as rental property, and still get the mortgage deduction.
You should ask all these questions you have of your tax advisor. Quite frankly, I don't know why anyone would give you a mortgage on a second house in the first place. And you really have no business buying a second house if you are planning to let your first house go into foreclosure. Foreclosure is for people who cannot afford to pay the mortgage for the house they own.
Dawn
I am sorry, but no.... we would never opt to put ourselves in that position that could financially ruin us just for a bigger house.
Foreclosure would never cross our minds as it would ruin your credit for good. Kiss anything else goodbye if you have foreclosure or bankrupcy for years. A great credit score is valuable to KEEP.
#1. You still have $700 on the old house to pay monthly, assuming you have a good renter and nothing goes wrong. Does that $700 you will be contributing monthly include all the taxes and insurance. Yes, you will have to provide insurance on the home because it is in your name. Renters would have to provide insurance on the contents. What is the renter is crappy and destroys something or worse... you find no renter.
#2. Consider the expenses of running a house? You'll be responsible for 2 not just 1 house for upkeep. It is expensive keeping a house in the proper order with upgrades and repairs. What happens if you need a new heating/cooling system in 1 or both homes?
#3. You won't be putting ANY money into savings? This means you cannont afford this move. Save no money, make no money.... what about retirement, college, home repairs, car repairs the unforseen expenses that pop up?
#4. If you cannot financially afford ALL expenses to maintain the 2 homes, with upkeep, insurance, taxes, save money for yourself and the what if's then you do not need to make this drastic financial move or you could be placing your future in financial ruin.
Remember, just because you "qualify" for something, does not mean it is a smart move.
Before you truly consider this, talk to your financial, tax and legal advisors and understand the HUGE risk you would be putting on yourselves. That would not be worth a larger house in my book. We are big time planners financially and we would never do anything like that. Think of Need vs Want.
Best wishes and I am sorry if I came across harsh, I certainly didn't mean to... the urgency in my tone was please, no don't do this.
No, I would not move. In fact, hubby and I are in a similar situation and we decided to stay put. Foreclosure isn't an option to me, because it is that sort of thinking by lots of people that contributed to this housing disaster. If you cannot afford two houses, in crisis, then you shouldn't own two houses. Two of my neighbors "upsized," and thanks to them I now have two foreclosure near me that have brought my property value down.
Unless you can rent your current house at a break even point, and have 6 months in savings to cover both houses, you would be crazy to take this risk.
IF you are going to rent your current home, rent it for the full mortgage price.. Otherwise this is not a good idea.
And no way should your husband take risks his credit by foreclosing on the current house.
Just because you qualify is not a reason to gamble like this.
Speak with a financial planner and find out the best way to handle your current home.
Purchasing a new home is just going to strain everything. Your financial situation and your marriage and your futures.
I would stay in the current home until things settle down and you can sell it. I'm not sure it matters that it's only in your husbands name...you still have combined finances.
Why take on more financial stress? Let the market settle down...property values will go up again and you will be able to sell your current property and then start fresh on a new one. Are you able to meet your current mortgage? Don't do anything risky...if you like the schools better in another area, just see if you can "choice in" to another school district without moving.
Sorry - I would NOT go for a bigger house if it meant that we won't be able to save money...bigger isn't always better.
Either wait until you can sell the current home or rent it out for mortgage - if that means refinancing the mortgage to a lower rate then fine.....if you can't do that. Stay put..if you are anxious??? that's your RED FLAG - DANGER WILL ROBINSON!!! (flapping arms in the air wildly!!) DO NOT GO THERE!!
And foreclosure? You can kiss your "really good credit" buh-bye!! I would NEVER risk damaging my credit for a 'bigger house' does NOT compute. DOES NOT make sense...either sell the home you have now and buy the next one or stay put. If you even think foreclosure - you are doing yourself and your family a HUGE disservice (not to mention the other people in the US who will have to end up carrying that burden as well).
Nope.
It's not the time to do this.
You might qualify, but this plan is pushing you too close to the bone.
One unexpected repair or emergency could push you all over the edge.
Make due with your current house for another 5 years and make it seem larger by de-cluttering and/or getting rid of everything you don't need.
There are some programs that can help you refinance an underwater mortgage that might help you out - look into them.
Or sell it outright (even at a loss) if you must.
Walking away from it, letting it go to foreclosure will ruin your credit for a decade or more.
We rent out our first home but we paid off that mortgage on it already - some years we make money on it and some years we don't.
We had to replace a water heater, stove and fridge for it last year.
We've had good renters and bad.
When we can sell it to pay off our 2nd home's mortgage, we'll do it faster than you can blink, but we have to wait it out like everyone else.
heavens! buying a better place and renting out your current one is a great option, but not if you're going to go in the hole every month! and if you're already worrying about foreclosure, i'd definitely wait. a new house is not worth that degree of nailbiting.
khairete
S.
Not a good idea in the state that you live in where most people are trying to leave because they can't find jobs or decent housing. CA is a joint community property state. Your husband is responsible for this property. Were you married before or after the purchase of this house? That will play a part possibly.
If you are only going to squeak by with two homes it is not a thing to do. As others said just because you "qualify" doesn't make it necessary. We all want a bigger and better home in a bigger or better neighborhood. That is what we have been programmed to do. Look down deep inside and truly see if this is something that is really needed. To let a house go into foreclosure is playing Russian Roulette with your future. It may take you another 15 years to get a home that you could buy in the next 10. Just because hubby has a "solid" job does not mean that he will be to keep it.
Foreclosure is not a pretty place to be with all the stress and all the phone calling and nagging that comes with it. The banks like to give you the run around and put you on hold for over an hour at a time because they can. Everytime you call they will always start from the beginning even if all the info is right in front of them. Can your marriage survive that?
Common law marriage states mean you are both responsibile for things. These states are in the west and there are about eight of them (CA, NM, AZ, CO, TX, UT, NV, ?). This was something I remember in my paralegal classes about states and property rights.
I go with the consenses of the group and wait it out for another five years. You will both be older and wiser and able to afford what you really want. Every child does not have to have their own room.
The other S.
Not sure if the house is too small that you are in. I wish I stayed in my condo. we have been renting it out for 3 yrs bc it is under water and we don't have the money to take to a closing if we sell. I looked into foreclosure and was told.........Definitely don't foreclose. Not worth it and you will be harassed. Saving is more important. My mortgage very expensive and I wish we could save for rainy day and retirement but we can't. Sounds like you should stay until a big pay raise! Sorry.
No, do not do this. First of all you have a contract to pay the mortgage on your existing property. If you default on that commitment, you can bet the mortgage company will go after your second house. They are entitled to recover the money they lent you. Foreclosing on a property is done in desperation and I can never see putting myself at risk this way. This is why I believe you should have at least a 10% , if not 20% down payment on a house. You need some skin in the game otherwise you don't have much to loose (other than your credit) by walking away.
If you really want to move to the bigger house, take your loss on your existing property and move on. Your husband is certainly legally obligated to pay the debt on the first house but also morally obligated IMHO.
It sounds like you are already over extended and should not be considering buying another, more expensive house.
As far as renting your current house, you HAVE to be able to afford both properties without renters because it's very possible that will happen.
My MIL just sold her rental property because it's a nightmare to be a landlord.
Depending on the state you live in and the time frame you choose to proceed it will very greatly. We actually were not liable for the difference of our short sale because of a temporary bill passed, but I am not sure that is still valid.
My best advice is to pay a Real Estate Attorney a few hundred dollars and have them draft you papers to the bank that holds your loan stating that if you short sale or even foreclose they will not come after you for the difference. The attorney will also advise you on whether or not you will be held responsible for the tax difference on the whole loan amount.
Honestly a few hundred to get good solid advise is nothing in comparison to what you owe in the end by not getting guidance.
Is there any particular reason why this upgrade is urgent? Has your family expanded? Are you planning to have a baby?
If so, are you able to add on to your current home to get the space you envision needing?
I would not rent out a home for less than the mortgage + taxes + insurance unless the difference was small--like under $200/mo.
I would sit tight in your current home (pun intended) and wait the down market out. We're doing that too right now--our current home was to be a starter home. Well, we now have 3 kids, when we had none when we bought the house. We had hoped to be living in a new construction LARGE home by now. We've had to scale back our expectations and learn to live in the home we have, and to make some adjustments, like having kids share rooms. It's not a bad thing to share rooms.
Good luck to you!
Hi Tiffany,
I would talk to a real estate attorney about the potential consequences if you end up short selling or forclosing on your current house. $700 sound like alot to have to cover each month, so Im not sure that renting your house is a *real* option for you.
Its a personal decision if you feel morally obligated to stick wih your house and the contract you agreed to, or if you take advantage of a circumstance that might not be available later.
Feel free to pm me.
Here's what I would do.
The market WILL go back up once the economy turns around.
Any real estate you own at that time will once again become a valuable resource. So even if you have to make a little bit of extra housing budgeting I would say if you can afford it buy as many houses as you can right now. They will make you money in the long run.
I have already started to see prices going up on houses in my area. The houses that we in the $50K-$60K area are creeping back up towards the 100K prices.
A month ago frame houses were all under $50K with brick houses the same size and similar sq. footage being around the $60K mark. This past weeks paper had very very little under $60K. So I know that prices are starting to slowly climb back up.
If I had the financial ability to find a better house I would jump at the chance right now. I remember when I was younger the same thing happened. I remember some of the people at church buying a lot of houses to rent out. Sort of building their retirement. They ended up buying over 50 cheap houses and renting them out. Once the market picked up they would fix the house up in a simple attractive way and sell it. They made millions. Their home in the OKC area is one that people drive by just to look at. They lived in a normal house in a normal neighborhood before they started buying the cheapest houses for sale and doing this with them.
There is no time in the foreseeable future when housing costs will be this low. That's why I would look until I found the exact house I wanted with very few upgrades needed and buy it. Then I would put the other house for rent and not worry about it if it didn't rent right away.
That house could just be put on the market too. You could let it sit empty until it sold or you could find someone that would rent it partially furnished with the understanding that it is for sale and they must allow Realtor's in to show it during the hours of XXam and XXpm.
If you can afford both payments and it will only be for a short few years at most I would go for the newer house in a heart beat. It is only going to go up in price.
You can refinance the house you are in now for a lower house payment (yes even if you are upside down). The problem is you can not use the rental income for 2yrs. BUT If you both qualify (for a new loan) without the extra income this might work...
Good Luck
This might help you knock off a couple hundred dollars off that $700 #
In order to qualify for a mortgage loan on the second house, you will have to show that you can pay both mortgages. If you can, then you shouldn't worry about foreclosure.
Why would you rent your house for $700 less per month than the mortgage payment? If the mortgage payment less $700 is what the fair market rental value of the house is, I say you need to stay there and hope the market comes back up.
It sounds like by doing this you will be stretching your finances. And mortgages take MANY years to pay off. Are you sure you want to get yourselves into that kind of debt/monthly stress for that long of a time? I think you should wait and see if a better opportunity presents itself.
If you can...a short sale is better. And there are some rules about paying back. I think under Obama there is no penalty but it ends soon either the end of this year or next. If you short sale you can also get relocation money. Foreclose too if you do cash for keys but short sale won't hurt as much.
I think even the best case senario here doesn't sound too good. If you would put yourself into a situation where you couldn't save, I don't think it's a good idea. I've been in that situation with my husband for the last 6 years at it sucks!!! We bought a house which was a dream. It's very small. I just wish we kept renting longer. We haven't had much time for fun. We have a son and never go on dates (well maybe once a year) because we can't afford a baby-sitter. I work full time and am away from the house 10 hours a day. Things are looking up a little but I would never upgrade unless it was totally an easy move.
